CivilSociety Financial Intelligence   

I.  How does money relate to civil society?
    A. Well, it is not really about money--it is about assets, and liabilities, and the stability that comes from long-term investment in a community.
    Money is only a convention, an idea, a way for people to trade on an even basis. 
        1. For example, until very recently, countries in Europe had no easy way to buy and sell between themselves. A German shopper had to convert his local deutchmarks to French francs if he wanted to buy something in France.  And he was at the mercy of several central banks and local intermediaries to provide him this service, with each one of them taking a fee for their services.  Now, with the coming of "modern money", the German can directly carry or send Euros to a French seller, with no intermediaries and no bother about differing rates of value.
        2. In the same way, "money" is used as a transportable item of value for trading hours of work for square meters of land, or an auto, or gold.  Gold also works, but is less "normal."

    B. Civil Society, as I will use it here in the balance of article, will mean a community living mostly in compliance with two primary laws summarized by Richard Maybury.
        1.  Do all that you have agreed to do
        2.  Do not encroach on others' person or property

    C. In these terms, stability comes when there is expectation that there is security because others's behavior can be predicted, trusted, and rewarded.  Without confidence in the future, treasures are kept liquid and easily moved to another place, not invested for the welfare of the community or one's descendents.  Where confidence in the future is growing, there seems to be an:
     increase in affordable housing for lower income citizens
     increase in business opportunities, small business startups, and employment rates
    increase in safety and security
    increase in civic participation for the common good of all
    increase in savings
    increase in sports, arts, and leisure activities
    increase in education at all ages
    increase in outside money entering a community for investment and charity

II. What is financial intelligence?
    A.  Financial intelligence, or financial wisdom, or financial literacy, is the idea that there are solid differences between assets and liabilities, income and expense, saving and spending, wealth and poverty.  This article is an attempt to clarify these terms, and work towards increasing personal and community stability and wealth.

    B.  There are many intelligences, such as those presented by Howard Gardner, not just IQ (intellectual quotient).
    Each of us has  MUTIPLE  types of intelligence, even though we each may have one or two favorites. 
    *Verbal-linguistic--the intelligence of words (mostly written words)
    *Logical-mathematical--the intelligence of numbers and reasoning
    *Visual-spatial--the intelligence of pictures and images
    *Musical--the intelligence of tone, rhythm, and timbre
    *Bodily-kinesthetic--the intelligence of the whole body and the hand
    *Interpersonal--the intelligence of social understanding
    *Intrapersonal--the intelligence of self-knowledge
    *Natural--the intelligence of relating to the natural world

    Gardner stressed how most formal education is focused on the first two types, but that these can all be learned. 

So can Financial Intelligence--the intelligence of how personal property is valued, traded, stored, and increased.  Unfortunately, financial intelligence is usually not learned in formal education, and most people only learn bad habits about finances, and most people trust the wrong people for financial advice.
    For example, this week I was advised to consult a financial planner to analyze my income, my expenses, and my "assets", and to get professional advice on how to become more secure for retirement.  I found a (long) list of certified financial planners and began checking on their credentials and experience.  Very interesting...they were all certified as financial planners, but all were certified in a very narrow range of specialization.  All of them were only credentialed in dealing with artificial assets, that is, pieces of paper that promised potential exchange for something of value.  ( I will discuss this fallacy later on in this document).  None, that is, none of these highly-skilled "professional advisors" showed credentials to give advice on trading in real assets such as real property (land, houses, apartment buildings, etc.).  In their experience descriptions, they only listed work selling insurance or stocks, bonds, or mutual funds. They seem to only have one solution, and they happen to sell that solution.  This is not meant to be disrespectful to the profession of financial advisors, but is illustrative of the need for each of us to learn for ourselves what we need and to go to the specialist able to solve a specialized problem.
That is what I mean by financial intelligence:  for paper assets, go to a paper asset broker; for real assets, go to real assets broker.  And, remember that a broker will sell you their solution and not "the other guys' solution."

For example, look at the return on a stock market investment.
http://www.fidelity.com

Historical Return Scenarios*
Based on a Hypothetical Portfolio of $100,000
     Best Return                   Worst Return
1 Yr.     154.59% Jun. 1933    -65.75% Jun. 1932
5 Yr.     34.7% May 1937    -16.3% May 1932
10 Yr.     20.57% May 1959     -4.44% Aug. 1939
15 Yr.     19.02% Jul. 1997    -0.15% Aug. 1944
25 Yr.     16.81% Dec. 1999    5.56% Aug. 1954
Average Annual Return over 25 years: 10.03%
     
About Historical Return Scenarios
This chart shows the broad market performance during several given market periods.
Performance numbers are based on a hypothetical portfolio with a market value of $100,000.

Market Decline Scenarios with initial Market value of $100,000
              Return          Ending Value
  Aug 1929-Jun 1932    -81.86%     18,136
  Dec 1972-Sep 1974    -39.85%     60,154
  Mar 1981-Jul 1982    -14.09%     85,913
  Aug 1987-Nov 1987    -26.49%     73,506
  Apr 2000-Sep 2002    -40.43%     59,568
         
About Market Decline Scenarios
The market decline scenarios table shows the hypothetical returns for the asset mix
(stocks, bond, and short-term) for five selected stock market declines from 1926 through 2002.

For an excellent look at real estate versus paper asset investments: National Residential Investments
http://www.nationalresidentialinvestments.com/comparing%20investments.htm
 

safe mode